FCC's Wheeler confident Supreme Court will back net neutrality

BURLINGAME, Calif. — Federal Communications Commission Chairman Tom Wheeler said late Thursday he's confident new rules requiring equal treatment of all Internet traffic — which were upheld this week by a federal appeals court in Washington — can survive a review by the U.S. Supreme Court.

"As (U.S. cable and telecom giants) keep making record profits, it will get harder and harder to argue against it," Wheeler said in an interview with USA TODAY, referring to the concept of net neutrality.

The fight over an open Internet has intensified in recent years as more U.S. consumers watch video entertainment on Web-based services such asNetflix (NFLX) and Hulu, as well as Amazon (AMZN) and Google's YouTube.

Americans are also using social media services like Facebook, Instagram and Snapchat to send each other more digital pictures and videos.

Large Internet service providers say these data-hungry applications are straining their networks and have sought to charge more for them, even as they benefit from growing amounts of data traffic.

Per-share profits at wireless giant AT&T (T) and No. 1 cable provider Comcast(CMCSA) are expected to rise this year and next, according to the latest estimates from Wall Street analysts.

Meanwhile, profit at Verizon Communications (VZ), the No. 1 wireless provider, is expected to slip this year on slightly lower sales, before rebounding next year.

The FCC passed the new rules in March, after a prior attempt to enforce net neutrality was overturned by the same appeals court in 2014 in the face of a legal challenge from Verizon.

While that earlier decision affirmed the FCC's right to regulate the Internet, it also said the government had gone too far in preventing broadband providers from charging more for preferential treatment of Web traffic.

The difference this time, according to Wheeler, is that the appeals court recognized high-speed Internet service is a utility, similar to water or electric service, that all Americans should have equal access to.

"This was a decision written for the Supreme Court" to review, he said.

USA TODAY

Federal court upholds FCC's net neutrality rules

Wheeler made the comments after an awards dinner in this town south of San Francisco, hosted by Silicon Valley Forum, a San Jose-based non-profit that promotes the region.

Earlier in the evening, Wheeler was one of four people given a 2016 Visionary Award.

Other honorees included Carl Bass, the CEO of design-software maker Autodesk;Jennifer Pahlka, founder and executive director of the non-profit Code for America; and Andy Grove, the former CEO of Intel who died earlier this year and who was awarded posthumously.

In his remarks to the gathering at the swank Kohl Mansion, Wheeler began by saying, "I want to thank the DC Court of Appeals. A wrong decision would've made tonight somewhat awkward."

After the laughter died down, Wheeler turned serious in his advocacy for an open Internet.

"High-speed Internet is the most important commodity of the 21st Century...the commodity that drives our economy," he said. "It has to be fast, fair and open if we're going to realize the promise of broadband."

Still, the argument against charging more for higher-quality video like that offered by Netflix has been muddled a bit by developments in the market for such services.

In March, for example, Netflix itself said it has been throttling speeds for AT&T and Verizon users for years, to spare customers hefty fees that would come with exceeding their monthly limits on data usage.

Even so, Netflix sales continue to climb, with revenue seen rising 29% this year and 25% in 2017.

And late last year, No. 3 wireless provider T-Mobile began offering Netflix and HBO subscribers free access to lower-resolution versions of those video services.

Yet this week's ruling by an appeals court that had previously ruled against the FCC is a huge boost for supporters of an open Internet, which will now persist unless and until the U.S. Supreme Court rules otherwise.

If Wheeler's confidence is proved justified, net neutrality is here to stay.

John Shinal has covered tech and financial markets for more than 15 years at Bloomberg, BusinessWeek,The San Francisco Chronicle, Dow Jones MarketWatch, Wall Street Journal Digital Network and others. Follow him on Twitter: @johnshinal.